Gore's oil reserve plan forces Treasury chief to alter views

WASHINGTON {AP} Vice President Al Gore learned Thursday he can count on support from President Clinton's Cabinet even if it means a top official has to edge away from previous views.

Treasury Secretary Lawrence Summers found himself being asked to explain a leaked memo he wrote a week ago in which he argued that making sales from the government's emergency oil reserve to drive down energy prices "would be a major and substantial policy mistake."

The memo's existence, first reported in The Wall Street Journal, came to light on the same day that presidential candidate Gore, whom Summers has also helped as an unofficial economic adviser, was advocating doing just that tapping into the Strategic Petroleum Reserve in an effort to hold down prices.

Summers said in a telephone interview, "We have always recognized that this would be, and indeed has been, a rapidly evolving situation and we all need to monitor it closely."

"There are a number of approaches for the prudent use of SPR that are now on the table, including those the vice president has proposed, which could be appropriate in current circumstances."

Gore, in an appearance at a Maryland oil distributorship, proposed using some crude oil from the reserve a government stockpile of nearly 600 million barrels intended to counter supply shortfalls in an effort to drive down prices. The price of crude oil on spot markets this week hit new 10-year highs above $37.

Under Gore's proposal, "several" releases of oil in 5 million increments would be put up for sale through a swap procedure with oil companies. Gore and his campaign did not say how much might be involved.

Officials said the arguments that Summers had used in his memo had been directed against an Energy Department proposal to sell 60 million barrels of oil, one-tenth of the reserve.

Summers, whose free-market policies have often carried the day in internal administration debates, said in the memo that making the 60 million barrels in oil sales would at best have a "modest effect" on prices.

To bolster his arguments, Summers invoked the name of Federal Reserve Chairman Alan Greenspan, whose views are held in high regard.

"Chairman Greenspan and I believe that using the Strategic Petroleum Reserve at this time, as proposed by DOE, would be a major and serious policy mistake," Summers' memo began.

For his part, Greenspan, who has not been advising the Gore campaign, refused to answer questions about the Summers memo when he emerged from a congressional hearing on education policy.

Summers' two-page memo dated Sept. 13 memo did leave open the possibility of trying a limited test sale of as much as 5 million barrels of oil, far less than the 60 million barrels being proposed in a separate two-page memo by Energy Secretary Bill Richardson. Both memos were sent to President Clinton with a cover letter from Gene Sperling, director of the president's National Economic Council.

The Summers memo said the Energy proposal would "set a dangerous precedent" by using the reserve to "manipulate prices" rather than sticking to the stockpile's original purpose of responding to supply disruptions.